Alberta well positioned for economic growth

Small Business Confidence Index reports

Ray Crossley discusses the challenges and opportunities for Alberta businesses.

Alberta’s Small Business Confidence Index, a measurement of small business owner optimism in the province’s economy, has increased once again. This growth follows the overall Alberta Confidence Index which surged sharply in January 2011.

The global economic recovery, particularly in emerging economies, has boosted the demand for natural resources and is causing a corresponding increase in commodity prices. The higher prices make it possible for companies in Alberta to begin or restart many of their energy-related projects.

Investment in energy development is expected to be a major driver of economic growth during the next five years. In 2011 a total of $106 billion in new oil sands projects have been approved or are under construction while only $16 billion remain on hold. Statistics Canada estimates that investment in Canada's unconventional energy sector will increase by 27.8 per cent in the same five-year period and the majority of this development will occur in Alberta.

The Alberta economy is expected to grow by 3.4 per cent in 2011 primarily due to increased business and consumer confidence which is helping to offset a weak natural gas industry. Non-energy investments are also expected to improve gradually as other segments of the economy expand. Lower revenues from natural gNas sales are expected to be offset by royalty revenues from increased bitumen production adding to overall provincial revenue. The development of leading energy technology in Alberta has been coupled with a positive international reputation, allowing local businesses to begin expansion into international markets and increasing growth potential

Job creation is expected to improve and push the unemployment rate below five per cent as employment growth exceeds labour force growth. Labour shortage is expected to become once again a top business challenge, but Alberta should be better suited to attract job-seekers as the unemployment rate differential between Alberta and the rest of Canada widens. Relatively low unemployment rates should place upward pressure on wages. Wage growth should outpace the growth in consumer prices and this is expected to benefit the retail and housing sectors.

Quick facts – Alberta’s growth outlook remains strong

We’ve detailed some key measures from the index, the Alberta Government Finance and Enterprise and the City of Calgary below:

In 2010, Alberta’s real GDP by industry advanced 4.0% up from a 4.8% decrease recorded in 2009. Nationally, real GDP expanded 3.3% in 2010, following the 2.6% decline of 2009.

Employment in Alberta fell by 4,200 in April 2011 and the unemployment rate increased from 5.7% to 5.9%. Nationally, employment rose by 58,000 while the unemployment rate declined from 7.7% in March to 7.8% in April.

In February, average weekly earnings in Alberta were the highest in the country at $1,037.98 (seasonally adjusted). This was an increase of 1.2% from January and 6.7% higher than a year earlier. Nationwide, average weekly earnings were $874.83 (seasonally adjusted), up 4.0% from February 2010.

Alberta’s year-over-year inflation rate was 3.0% in April, up from the 2.0% rate recorded in March. Nationally, the inflation rate stood at 3.3%.

As of January 1, 2011, Alberta’s population was estimated at 3,742,800 representing growth of 1.4% from a year earlier. While this was the slowest annual growth rate since 1995 for Alberta, it was above the national average of 1.1%.

In the fourth quarter of 2010, Alberta had a net interprovincial migration gain of 2,510 people. This was up from the gain of 1,155 in the third quarter.

Alberta retail sales rose by 1.5% (seasonally adjusted) between January and February, and were 5.7% above February 2010 levels. Nationally, February retail sales were up 0.4% month-over-month and 3.7% year over year.

In March, housing starts in Alberta declined by 0.9% from February to a seasonally adjusted annual rate of 23,200 units. Nationally, housing starts increased by 2.8% from February.

New house prices in Alberta rose 0.4% in January. Compared to a year ago, new house prices in Alberta were 0.8% higher. Nationally, new house prices were 2.1% higher than a year ago.

The value of building permits in Alberta increased by 112.0% (seasonally adjusted) in February 2011 to over $1.4 billion. The decline in the value of residential permits (-5.8%) was more than offset by the increase in the value of non-residential permits (338.0%).

The average number of rigs drilling in Alberta was 123 in April, down from 366 in March as the “spring break-up” set in. Drilling activity was 98.4% more than the numbers from April 2010 and through the first four months of 2011 activity is 41.0% higher than the same period a year ago.

Alberta wholesale merchants’ sales were estimated at $5.5 billion (seasonally adjusted) in February 2011, down 1.2 per cent from January but up 11.4 per cent from February 2010.

Alberta manufacturing sales were estimated at $5.5 billion (seasonally adjusted) in February 2011, up 1.4 per cent from January 2011 and 14.2 per cent from February 2010.

The number of personal bankruptcies in Alberta was 578 in January 2011, up 11.4 per cent from the previous month but down 15.5 per cent from January 2010.

The number of business bankruptcies in Alberta was 30 in January 2011, down 31.8 per cent.

Finally, the election of a Conservative majority government in Ottawa could have long-term benefits for the Albertan economy. The Tories are largely considered to be business- and Alberta-friendly, and with the uncertainty of future elections eliminated, businesses will have a stronger sense of confidence in moving forward with business and strategic plans.